Homebuyer suffering from appraisal anguish

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DEAR BENNY: My wife and I sold our home in New Jersey and moved to Melbourne, Fla., to start the last third of our lives.

We looked at more than 80 homes for sale, including foreclosures, short sales and actual homes being sold by real people.

Most of the homes were in such bad condition that it was discouraging to go out every day and look for our dream home. We finally decided that we needed to buy new to get what we were looking for. So we bought a new home, and that is when the trouble started.

The builder’s policy is for the buyer to take out a construction loan.

That is, you close on your home before it is built, and when the construction of your home is completed you then modify the loan to make it permanent. The builder reimburses you the interest on the loan for the time of construction.

We then looked for a bank to handle the mortgage. We chose “X” bank because its loan officer was upfront and explained to us, to the best of his ability, all the charges that we were going to have. In other words, he took his time with us.

So here is my question: The house was appraised for the full value that the builder was selling it for and was built in five months. When we were told to modify the loan, we were ready to move forward.

Then something we were not told in the beginning was that the bank had the right to reappraise the house at my cost of a second appraisal. The house was appraised for $20,000 less than what it sold for five months earlier. We told this to the builder who said don’t worry, because the first appraisal is good for six months. The builder even went to the bank to look into this for me, and it was told to butt out.

In the contract it does state that the lender has the right to order a second appraisal. I would think something like this should have been brought to my attention in the beginning.

This bank is the only bank so far to ask for a second appraisal of the five banks we could have gone to.

So much for honesty and integrity.

The builder has not lowered its price of the same house as of the date of this letter. The builder’s only option is to stop recommending this bank to new-home buyers.

Do I have any options? By contract I have to modify within 30 days of completion to maintain the locked-in interest rate. —Byron

DEAR BYRON: I understand that you are upset because the bank required a second appraisal, and it came in lower than the original one just five months earlier.

But you have admitted that the contract does state that the bank has that right.

So, with all respect, I am not entirely sympathetic to your situation.

You knew, or should have known, about the possibility of that second appraisal. You could have tried to negotiate with a bank to accept the first appraisal, so long as no more than X months elapse between the original loan and the permanent loan.

However, are you completely ignoring the builder?

His marketing plan, while not unique, is not common. Basically, he built your house at no cost to him; he was using the construction loan money instead of his own funds.

He did, however, agree to reimburse you for the interest you paid on the construction loan. I assume you are still paying interest on that loan, so why not demand that he reimburse you for the interest you paid to date and start paying the future interest as well as assist you in getting a new loan?

A word of advice to my readers: Read all documents before you sign, and, if you have questions, don’t be afraid to ask. And if you don’t understand what you are signing, ask an attorney for guidance.